can someone confirm that creating a site with option to invest in shares and get paid dividends (all using only bitcoins) is indeed illegal? Or if dividends are paid with in game currency?
Offering shares of a business for sale in return for a share of future profits is going to be considered a stock offer or some other form of security in almost any jurisdiction in the world. In this case, it will be unregistered and unlicensed. As the pirateat40 case shows, at least in the United States, the SEC will consider this to be under its jurisdiction, and they almost certainly do have jurisdiction over such offers. It probably isn't illegal to purchase such entities, but to offer them for sale probably breaks the law.
The other alternative is worse, though. That is that the investors have inadvertently joined a partnership with the illegal business and would be personally on the hook for any legal liabilities the company racks up. I think the former is more likely to be the case, though.